ECONOMICS
BUSINESS CYCLES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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believe that the deviations of output below potential output during recessions are socially costly.
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presume that much unemployment is involuntary.
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attempt to improve the microeconomics foundations of the traditional Keynesian models, not challenge their major premises.
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All of the above
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Both a and c
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Detailed explanation-1: -Much of neo-Keynesian economic theory was developed by leaders of economic profession, such as John Hicks, Maurice Allais, Franco Modigliani, Paul Samuelson, Alvin Hansen, Lawrence Klein, James Tobin and Don Patinkin.
Detailed explanation-2: -New Keynesian advocates maintain that prices and wages are “sticky, ” meaning they adjust more slowly to short-term economic fluctuations. This, in turn, explains such economic factors as involuntary unemployment and the impact of federal monetary policies.
Detailed explanation-3: -In the 1970s, however, new classical economists such as Robert Lucas, Thomas J. Sargent, and Robert Barro called into question many of the precepts of the Keynesian revolution.
Detailed explanation-4: -Keynes argued that inadequate overall demand could lead to prolonged periods of high unemployment. An economy’s output of goods and services is the sum of four components: consumption, investment, government purchases, and net exports (the difference between what a country sells to and buys from foreign countries).